Commodity ETF Alert October 2012 Portfolio Update
October 23, 2012
Iran’s last stand?
The West’s long-standing nuclear standoff with Iran is taking a turn for the better…
What’s going on?
Iran’s currency (the Rial) is falling off a cliff thanks to the ongoing US and European Union sanctions. Due to this sudden devaluation, the rogue country is experiencing rampant inflation.
But that’s not all…
European currency printing companies have stopped doing business in Iran. And that means Iran’s banks may soon find themselves unable to supply more hard currency to Iranian citizens.
It’s becoming clear that Iran’s banking system is on very shaky ground.
If Iran doesn’t give up its nuclear ambitions soon, the country could find itself in a very dire situation.
And that’s most likely why the Iranian leaders are reportedly reaching out to the US for a new round of nuclear talks.
While these developments are promising signs the standoff could be coming to an end, it’s bad news for oil market bulls. If Iran is finally ready to give up their nuclear program, the fear premium that’s kept oil prices inflated may be about to vanish.
What should we do with our remaining shares of OIL?
Let’s find out…
Position Updates
. . . . iPath S&P GSCI Crude Oil (OIL) – SELL SECOND HALF
As you know, we already closed half our OIL position on September 11th for a 14% gain. And now that Iran appears ready to negotiate, it’s time to close the second half of this trade.
Go ahead and sell all your remaining shares of OIL for a small gain.
I’m always keeping a close eye on the oil markets. If I see another trade set-up, you’ll be the first to know!
. . . . PowerShares DB Multi-Sector Metals Fund (DBB) – Buy up to $19.00
Industrial metals aren’t looking so hot over the past few days. In fact, global growth fears are sending copper, aluminum, and zinc to new multi-week lows.
But remember, we knew there was the possibility for additional weakness in industrial metals from the get go. And like I said in the initial trade alert for DBB, that weakness should be bought.
Why?
The massive 3rd round of quantitative easing instituted by the Fed is just getting started. And that means it’s highly likely we’ll see a stronger US economy in coming months. Of course, a stronger economy means more demand for the basic metals held in DBB.
If you haven’t already, go ahead and buy DBB up to $19.00…
. . . . iPath Dow Jones-UBS Cocoa (NIB) – SELL
Some good news and bad news on our cocoa trade…
First the good news- cocoa’s rallied nicely since we last spoke.
But the bad news is, I suggested you sell NIB if it closed below $32.00 on a daily basis in the last update. And on October 15th, NIB closed at $31.99… a measly penny below my recommended sell price.
Unfortunately, that means our NIB trade is now closed. If you haven’t already, go ahead and sell NIB.
. . . . US 12-Month Natural Gas (UNL) – HOLD
Natural gas is on the move!
In fact, the seemingly abundant commodity pushed to a new 11-month high of $3.65 mmBtu in just the past few days.
Why such a strong rally for a commodity that many analysts thought would become “worthless” this year?
Cooler temperatures are creeping into the northern US. And it won’t be long until Old Man Winter makes his official arrival.
Of course, that means heating demand is about to surge. Mix cooler weather with the EIA’s remarkably weak storage numbers and you have the breeding ground for much higher natural gas prices.
As you know, we’re already sitting on an 18% gain in UNL. Let’s keep holding for higher prices in the months ahead!
. . . . iShares COMEX Gold Trust (IAU) – HOLD
Gold has entered into the correction we talked about in recent updates. As a matter of fact, in the past three weeks, the yellow metal’s fallen from $1,790 to around $1,700 an ounce.
But whatever you do, don’t panic…
We knew this pullback was coming. After all, it’s only natural for investors to take profits after the rally gold experienced in August and September.
But once the yellow metal touches technical support at the $1,690 area, we should see buyers start stepping in again.
We’re still sitting on a 7% profit in our IAU position. Let’s keep holding IAU for bigger gains ahead!
. . . . ETFS Physical Palladium Shares (PALL) – SELL
Palladium isn’t faring so well. Now that South African mine violence appears to be settling down, the precious/industrial metal is back to trading on economic fundamentals.
And that has investors spooked…
Why?
As you know, palladium is used heavily in the automotive industry. But with debt problems still lingering in Europe, investors fear already subdued automotive sales may weaken even further.
Bottom line…
If Europe’s economy doesn’t rebound soon, poor automotive demand will likely keep palladium under wraps. As a result, let’s go ahead and cut palladium from the portfolio for now.
We’ll jump back into this metal once the European economy regains its footing.
. . . . iShares Silver Trust (SLV) – Buy up to $33.00
Like its big brother gold, silver’s endured a bit of selling in October. In fact, the shiny metal dropped from $35 an ounce earlier this month to around $32 as of today.
What’s next for the lustrous metal?
I wouldn’t be surprised to see silver drop to $30 an ounce before moving higher. The US Dollar, while fundamentally weak, looks like it could rally given the right set of conditions.
Of course, that means silver, along with other commodities, may see additional weakness in the near future. I’ll dive into the dollars near-term prospects in our next monthly trade alert.
For now, go ahead and buy SLV at any price under $33.00…
Category: Commodity Trading
